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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For Quarter Ended SEPTEMBER 30, 2003 Commission File No. 1-8249
LINCORP HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 23-2161279
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(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
3900 Park Ave., Suite 102
Edison, NJ 08820
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(Address of Principal Executive (Zip Code)
Offices)
Registrant's Telephone Number,
Including Area Code: (732) 494-9455
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12(b)-2 of the Exchange Act).
Yes No X
--- ---
Indicate the number of shares outstanding or each of the issuer's classes of
common stock, as of the latest practicable date.
1,730,559 SHARES OF COMMON STOCK OUTSTANDING AT OCTOBER 10, 2003
LINCORP HOLDINGS, INC.
INDEX
PART 1. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Balance Sheets 1
Statements of Operations 2
Statements of Cash Flows 3
Notes to Financial Statements 4
Item 2 Management's Financial Discussion 6
Item 3. Quantitative and Qualitative Disclosures 7
About Market Risk
Item 4. Evaluation of Disclosure Controls and Procedures 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 8
Item 3. Default upon senior securities 8
Item 6. Exhibits and Report on Form 8-K 8
SIGNATURE 9
EXHIBIT INDEX 10
PART 1 - FINANCIAL INFORMATION
LINCORP HOLDINGS, INC.
BALANCE SHEETS
(IN THOUSANDS)
September 30, December 31,
2003 2002
----------- -----------
(Unaudited)
ASSETS
Cash ........................................................ $ 1 $ 5
Investment in real estate ................................... 300 300
----------- -----------
$ 301 $ 305
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities:
Debt secured by real estate,
including accrued interest ......................... $ 620 $ 620
Other borrowed funds, including accrued interest ....... 175,607 175,535
Other liabilities ...................................... 4,141 4,018
----------- -----------
180,368 180,173
----------- -----------
Commitments and contingent liabilities
Stockholders' deficit:
Preferred stock, Series A;
200 shares authorized;
no shares issued and outstanding ..................... -- --
Preferred stock, $.01 par value;
10,000 shares authorized;
no shares issued and outstanding ..................... -- --
Common stock, $.01 par value;
1,990,000 shares authorized;
1,730,559 shares issued and outstanding .............. 17 17
Capital contributed in excess of par value .............. 153,638 153,638
Accumulated deficit ..................................... (333,722) (333,523)
----------- -----------
(180,067) (179,868)
----------- -----------
$ 301 $ 305
=========== ===========
The accompanying notes are an integral part of these financial statements.
1
LINCORP HOLDINGS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
UNAUDITED
Three Months Nine Months
Ended September 30, Ended September 30,
---------------------- ----------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Expenses:
Interest expense ............................... $ 28 $ 31 $ 82 $ 91
General and administrative expenses ............ 35 25 116 64
--------- --------- --------- ---------
Total expenses .......................... 63 56 198 155
--------- --------- --------- ---------
Loss before income taxes .......................... (63) (56) (198) (155)
Income taxes ...................................... 1 -- 1 1
--------- --------- --------- ---------
Net loss .......................................... $ (64) $ (56) $ (199) $ (156)
========= ========= ========= =========
Basic loss per share of Common Stock outstanding .. $ (0.04) $ (0.03) $ (0.11) $ (0.09)
========= ========= ========= =========
Weighted average shares of Common Stock outstanding 1,731 1,731 1,731 1,731
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
2
LINCORP HOLDINGS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------------- ---------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
OPERATING ACTIVITIES
Net loss ............................................ $ (64) $ (56) $ (199) $ (156)
----------- ----------- ----------- -----------
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Increase in accrued interest payable ...... 18 27 72 81
Increase in other liabilities ............. 24 32 123 73
----------- ----------- ----------- -----------
Net cash provided by (used in) operating activities . (22) 3 (4) (2)
Cash, beginning of period ........................... 23 6 5 11
----------- ----------- ----------- -----------
Cash, end of period ................................. $ 1 $ 9 $ 1 $ 9
=========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest ................................ $ -- $ -- $ -- $ --
Income taxes ............................ $ 1 $ -- $ 1 $ 1
The accompanying notes are an integral part of these financial statements.
3
LINCORP HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The balance sheet of Lincorp Holdings, Inc. (the "Company") as of September 30,
2003, and the related statements of operations and cash flows for the nine-month
periods ended September 30, 2003 and 2002, presented in this Form 10-Q are
unaudited. In the opinion of management, all adjustments necessary for a fair
presentation of such financial statements have been included. Such adjustments
consist only of normal recurring items. The balance sheet as of December 31,
2002 was derived from the Company's audited December 31, 2002 balance sheet.
Interim results are not necessarily indicative of results for a full year.
The financial statements and notes are presented as required by Form 10-Q, and
do not contain certain information included in the Company's annual audited
financial statements and notes. These financial statements should be read in
conjunction with the annual audited financial statements of the Company and the
notes thereto, together with management's discussion and analysis of financial
condition and results of operations, contained in the Form 10-K for the fiscal
year ended December 31, 2002.
NOTE 2 - LIQUIDITY AND GOING CONCERN
At September 30, 2003, the Company had approximately $176.2 million of principal
and accrued interest (the "Indebtedness") outstanding under its various debt
obligations. The Company is in payment default under several of the debt
obligations comprising the Indebtedness. The Indebtedness is secured by a senior
security interest in all of the Company's assets.
The Company's debt holders have waived substantially all interest owing by the
Company on its Indebtedness to them that would otherwise accrue since July 1,
1998. For the nine months ended September 30, 2003 and 2002, the total interest
waived was approximately $5.4 million for each nine month period.
The Company's sources of funds during the period ended September 30, 2003 and to
date, have been primarily from its previously existing cash balances and
advances from the two majority shareholders. Unless the Company's debt holders
continue to defer in realizing on the pledged collateral, the Company will be
unable to continue as a going concern.
4
LINCORP HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - REAL ESTATE OPERATIONS
During the fourth quarter of 1997, the Company made a $0.6 million secured first
mortgage loan to Republic Development Co. (the "Republic Mortgage Loan") for the
purpose of developing a commercial real estate property. This loan was scheduled
to mature May 19, 1998. To finance this loan, the Company borrowed funds from
Wilmington Capital Management Inc. ("Wilmington"). The Wilmington borrowing was
in the form of a $602,000 discounted note (the "Wilmington Republic Note") which
matured on May 19, 1998 in the amount of $620,000 and was secured by the
Republic Mortgage Loan.
The Republic Mortgage Loan was not repaid on May 19, 1998 and in November 1999,
the Company foreclosed on the Republic Mortgage Loan and took possession of the
land. At December 31, 2000, the Company reduced the carrying value of the land
by $311,000 to $300,000 which it believes is the current fair market value of
the land. The Company is currently pursuing legal action against Republic
Development Co. and the original appraisal firm. The ultimate outcome of this
litigation cannot be determined at this time. The Wilmington Republic Note,
which matured on May 19, 1998, was not repaid by the Company as its payment was
dependent upon collecting the Republic Mortgage Loan. Wilmington has agreed to
defer the collection of its note until the land is sold.
5
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S FINANCIAL DISCUSSION
LIQUIDITY AND GOING CONCERN
At September 30, 2003, the Company had approximately $176.2 million of principal
and accrued interest (the "Indebtedness") outstanding under its various debt
obligations. The Company is in payment default under several of the debt
obligations comprising the Indebtedness. The Indebtedness is secured by a senior
security interest in all of the Company's assets.
The Company's debt holders have waived substantially all interest owing by the
Company on its Indebtedness to them that would otherwise accrue since July 1,
1998. For the nine months ended September 30, 2003 and 2002, the total interest
waived was approximately $5.4 million for each six month period.
The Company's sources of funds during the period ended September 30, 2003 and to
date, have been primarily from its previously existing cash balances and
advances from the two majority shareholders. Unless the Company's debt holders
continue to defer in realizing on the pledged collateral, the Company will be
unable to continue as a going concern.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 2002
For the nine months ended September 30, 2003 the Company had a net loss of
$199,000 and for the nine months ended September 30, 2002 the Company had a net
loss of $156,000.
FINANCIAL POSITION
MATERIAL CHANGES SINCE DECEMBER 31, 2002
There was no significant change in the Company's financial position since
December 31, 2002.
6
PART I - FINANCIAL INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No material changes have occurred related to the Company's policies, procedures,
controls or risk profile.
ITEM 4. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The management of the Company including Mr. Gordon Flatt as President, Chief
Executive Officer and Chief Financial Officer have evaluated the Company's
disclosure controls and procedures. Under rules promulgated by the Securities
and Exchange Commission (the "SEC"), disclosure controls and procedures are
defined as those "controls or other procedures of an issuer that are designed to
ensure that information required to be disclosured by the issuer in the reports
filed or submitted by it under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time periods specified in the
Commission's rules and forms." Based on the evaluation of the Company's
disclosure controls and procedures, it was determined that such controls and
procedures were effective as of September 30, 2003, the date of the conclusion
of the evaluation.
Further, there were no significant changes in the internal controls or in other
factors that could significantly affect these controls after September 30, 2003,
the date of the conclusion of the evaluation of disclosure controls and
procedures.
7
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments with respect to litigation.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
(a) At September 30, 2003 the Company had approximately $176.2 million of
principal and accrued interest (the "Indebtedness") outstanding under
its various debt obligations. The Company is in payment default under
several of the debt obligations comprising the Indebtedness. The
Indebtedness is secured by a senior security interest in all of the
Company's assets.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
--------
31 Certification of the Chief Executive Officer and Chief
Financial Officer pursuant to Rule 13A-14(a)/ 15D-14(a) of the
Securities Exchange Act of 1934.
32 Certification of the Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes - Oxley Act of
2002.
B. REPORTS ON 8-K
--------------
NONE
8
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LINCORP HOLDINGS, INC.
Dated: November 13, 2003 /s/ GORDON FLATT
---------------------------------------
Gordon Flatt
President, Chief Executive Officer
and Chief Financial Officer
9
EXHIBIT INDEX
31 Certification of the Chief Executive Officer and Chief Financial
Officer pursuant to Rule 13A-14(a) / 15D-14(a)
32 Certification of the Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes - Oxley Act of 2002.
10